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INVESTMENT SECURITIES

12 Months Ended

Dec. 31, 2023

INVESTMENT SECURITIES

INVESTMENT SECURITIES

2.	INVESTMENT SECURITIES

Available-for-Sale Debt Securities

The following tables summarize the amortized cost, fair value, and ACLS of AFS debt securities and the corresponding amounts of related gross unrealized gains and losses recognized in AOCI:

Gross

Gross

Allowance

Amortized

Unrealized

Unrealized

for

Fair

December 31, 2023 (in thousands)

Cost

Gains

Losses

Credit Losses

Value

U.S. Treasury securities and U.S. Government agencies

$

421,576

$

—

$

(14,543)

$

—

$

407,033

Private label mortgage-backed security

443

1,330

—

—

1,773

Mortgage-backed securities - residential

167,996

176

(13,462)

—

154,710

Collateralized mortgage obligations

22,698

36

(1,075)

—

21,659

Corporate bonds

2,012

8

—

—

2,020

Trust preferred security

3,800

318

—

—

4,118

Total available-for-sale debt securities

$

618,525

$

1,868

$

(29,080)

$

—

$

591,313


					Gross			Gross			Allowance
		Amortized			Unrealized			Unrealized			for			Fair
December 31, 2022 (in thousands)		Cost			Gains			Losses			Credit Losses			Value

U.S. Treasury securities and U.S. Government agencies		$	436,333		$	1		$	(25,193)		$	—		$	411,141
Private label mortgage-backed security			843			1,284			—			—			2,127
Mortgage-backed securities - residential			189,312			16			(17,455)			—			171,873
Collateralized mortgage obligations			22,774			21			(1,427)			—			21,368
Corporate bonds			10,000			1			—			—			10,001
Trust preferred security			3,741			114			—			—			3,855
Total available-for-sale debt securities		$	663,003		$	1,437		$	(44,075)		$	—		$	620,365

Held-to-Maturity Debt Securities

The following tables summarize the amortized cost, fair value, and ACLS of HTM debt securities and the corresponding amounts of related gross unrecognized gains and losses:


					Gross			Gross						Allowance
		Amortized			Unrecognized			Unrecognized			Fair			for
December 31, 2023 (in thousands)		Cost			Gains			Losses			Value			Credit Losses

U.S. Treasury securities and U.S. Government agencies		$	65,000		$	—		$	(163)		$	64,837		$	—
Mortgage-backed securities - residential			25			—			—			25			—
Collateralized mortgage obligations			6,386			48			(121)			6,313			—
Corporate bonds			4,986			6			—			4,992			(10)
Obligations of state and political subdivisions			—			—			—			—			—
Total held-to-maturity debt securities		$	76,397		$	54		$	(284)		$	76,167		$	(10)


					Gross			Gross						Allowance
		Amortized			Unrecognized			Unrecognized			Fair			for
December 31, 2022 (in thousands)		Cost			Gains			Losses			Value			Credit Losses

U.S. Treasury securities and U.S. Government agencies		$	75,000		$	106		$	—		$	75,106		$	—
Mortgage-backed securities - residential			27			—			(1)			26			—
Collateralized mortgage obligations			7,270			54			(148)			7,176			—
Corporate bonds			4,974			—			(49)			4,925			(10)
Obligations of state and political subdivisions			125			—			(1)			124			—
Total held-to-maturity debt securities		$	87,396		$	160		$	(199)		$	87,357		$	(10)

Sales and Calls of Available-for-Sale Debt Securities

During 2023, 2022, and 2021 there were no material sales of AFS debt securities. The Company had AFS debt securities called during 2023, with an amortized cost of $65 million. The Company had no AFS debt securities called during 2022. The Company had AFS debt securities called during 2021, with an amortized cost of $90 million.

Debt Securities by Contractual Maturity

The following table presents the amortized cost and fair value of debt securities by contractual maturity as of December 31, 2023. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or early termination penalties. Securities not due at a single maturity date are detailed separately.

Available-for-Sale

Held-to-Maturity

Debt Securities

Debt Securities

Amortized

Fair

Amortized

Fair

December 31, 2023 (in thousands)

Cost

Value

Cost

Value

Due in one year or less

$

189,872

$

187,479

$

50,000

$

49,876

Due from one year to five years

233,716

221,574

19,986

19,953

Due from five years to ten years

—

—

—

—

Due beyond ten years

3,800

4,118

—

—

Private label mortgage-backed security

443

1,773

—

—

Mortgage-backed securities - residential

167,996

154,710

25

25

Collateralized mortgage obligations

22,698

21,659

6,386

6,313

Total debt securities

$

618,525

$

591,313

$

76,397

$

76,167

Unrealized-Loss Analysis on Debt Securities

The following tables summarize AFS debt securities in an unrealized loss position for which an ACLS had not been recorded as of December 31, 2023 and 2022, aggregated by investment category and length of time in a continuous unrealized loss position:

Less than 12 months

12 months or more

Total

Unrealized

Unrealized

Unrealized

December 31, 2023 (in thousands)

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

Available-for-sale debt securities:

U.S. Treasury securities and U.S. Government agencies

$

26,707

$

(84)

$

380,326

$

(14,459)

$

407,033

$

(14,543)

Mortgage-backed securities - residential

1,911

(23)

136,180

(13,439)

138,091

(13,462)

Collateralized mortgage obligations

1,668

(52)

17,239

(1,023)

18,907

(1,075)

Trust preferred security

—

—

—

—

—

—

Total available-for-sale debt securities

$

30,286

$

(159)

$

533,745

$

(28,921)

$

564,031

$

(29,080)


		Less than 12 months						12 months or more						Total
					Unrealized						Unrealized						Unrealized
December 31, 2022 (in thousands)		Fair Value			Losses			Fair Value			Losses			Fair Value			Losses

Available-for-sale debt securities:
U.S. Treasury securities and U.S. Government agencies		$	229,372		$	(7,139)		$	171,676		$	(18,054)		$	401,048		$	(25,193)
Mortgage-backed securities - residential			105,274			(7,434)			65,520			(10,021)			170,794			(17,455)
Collateralized mortgage obligations			20,418			(1,426)			6			(1)			20,424			(1,427)
Total available-for-sale debt securities		$	355,064		$	(15,999)		$	237,202		$	(28,076)		$	592,266		$	(44,075)

As of December 31, 2023, the Bank’s portfolio consisted of 191 securities, 144 of which were in an unrealized loss position.

As of December 31, 2022, the Bank’s portfolio consisted of 179 securities, 163 of which were in an unrealized loss position.

As of December 31, 2023 and 2022, there were no holdings of debt securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.

Mortgage-Backed Securities and Collateralized Mortgage Obligations

As of December 31, 2023, with the exception of the $1.8 million private label mortgage-backed security, all other mortgage-backed securities and CMOs held by the Bank were issued by U.S. government-sponsored entities and agencies, primarily the FHLMC and FNMA. As of December 31, 2023 and 2022, there were gross unrealized losses of $14.5 million and $18.9 million related to AFS mortgage-backed securities and CMOs. Because these unrealized losses are attributable to changes in interest rates and illiquidity, and not credit quality, and because the Bank does not have the intent to sell these securities, and it is likely that it will not be required to sell the securities before their anticipated recovery, management does not consider these securities to have OTTI.

Trust Preferred Security

The Parent Company owns a floating rate trust preferred security with a $5 million par value. The coupon on this security is based on the 3-month Term SOFR rate plus 159 basis points. The Company performs an ongoing analysis of the credit risk of the underlying borrower in relation to its TRUP.

Private Label Mortgage-Backed Security

The Bank owns one private label mortgage-backed security with a total carrying value of $1.8 million as of December 31, 2023. This security is mostly backed by “Alternative A” first-lien mortgage loans, but also has an insurance “wrap” or guarantee as an added layer of protection to the security holder. This asset is illiquid, and as such, the Bank determined it to be a Level 3 security in accordance with ASC Topic 820, Fair Value Measurement. Based on this determination, the Bank utilized an income valuation model (“present value model”) approach, in determining the fair value of the security. This approach is beneficial for positions that are not traded in active markets or are subject to transfer restrictions, and/or where valuations are adjusted to reflect illiquidity and/or non-transferability. Such adjustments are generally based on available market evidence. In the absence of such evidence, management’s best estimate is used. Management’s best estimate consists of both internal and external support for this investment.

See additional discussion regarding the Bank’s private label mortgage-backed security in this section of the filing under Footnote 14 “Fair Value.”

The following table presents a rollforward of the Bank’s private label mortgage-backed security credit losses recognized in earnings:


Years Ended December 31, (in thousands)		2023			2022			2021

Balance, beginning of period		$	1,462		$	1,462		$	1,462
Recovery of losses previously recorded			—			—			—
Balance, end of period		$	1,462		$	1,462		$	1,462

Further deterioration in economic conditions could cause the Bank to record an additional impairment charge related to credit losses of up to $443,000, which is the current gross amortized cost of the Bank’s remaining private label mortgage-backed security.

Rollforward of the Allowance for Credit Losses on Debt Securities

The tables below present a rollforward for 2023 and 2022 of the ACLS on AFS and HTM debt securities:


			ACLS Roll-forward
			Years Ended December 31,
			2023															2022
			Beginning						Charge-						Ending			Beginning						Charge-						Ending
(in thousands)			Balance			Provision			offs			Recoveries			Balance			Balance			Provision			offs			Recoveries			Balance

Available-for-Sale Securities:
Corporate Bonds			$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Held-to-Maturity Securities:
Corporate Bonds				10			—			—			—			10			47			(37)			—			—			10

Total			$	10		$	—		$	—		$	—		$	10		$	47		$	(37)		$	—		$	—		$	10

The ACLS on the Company’s HTM corporate bonds remained unchanged during 2023 based on no change to the PD and LGD estimates on these bonds. PD and LGD estimates for these bonds were elevated during 2020 due to pandemic-driven economic concerns.

There were no HTM debt securities in nonaccrual status or past due 90 days or more as of December 31, 2023 and 2022. All of the Company’s HTM corporate bonds were rated investment grade as of December 31, 2023 and 2022.

There were no HTM debt securities considered collateral dependent as of December 31, 2023 and 2022.

Pledged Debt Securities

Debt securities pledged to secure public deposits, securities sold under agreements to repurchase, and securities held for other purposes, as required or permitted by law are as follows:


Years Ended December 31, (in thousands)			2023			2022

Amortized cost			$	106,169		$	236,047
Fair value				99,530			217,562
Carrying amount				99,530			217,562

Equity Securities

There were no material sales of equity securities in 2023. During 2022, the Company sold an equity security for $2.2 million and realized a loss of $55,000. There were no material sales of equity securities in 2021. The following tables present the carrying value, gross unrealized gains and losses, and fair value of equity securities with readily determinable fair values:

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

December 31, 2023 (in thousands)

Cost

Gains

Losses

Value

Freddie Mac preferred stock

$

—

$

174

$

—

$

174

Total equity securities with readily determinable fair values

$

—

$

174

$

—

$

174


					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
December 31, 2022 (in thousands)		Cost			Gains			Losses			Value

Freddie Mac preferred stock		$	—		$	111		$	—		$	111
Total equity securities with readily determinable fair values		$	—		$	111		$	—		$	111

For equity securities with readily determinable fair values, the gross realized and unrealized gains and losses recognized in the Company’s consolidated statements of income were as follows:


		Gains (Losses) Recognized on Equity Securities
		Year Ended December 31, 2023									Year Ended December 31, 2022
Years Ended December 31, (in thousands)		Realized			Unrealized			Total			Realized			Unrealized			Total

Freddie Mac preferred stock		$	—		$	63		$	63		$	—		$	(59)		$	(59)
Community Reinvestment Act mutual fund			—			—			—			(204)			—			(204)
Total equity securities with readily determinable fair value		$	—		$	63		$	63		$	(204)		$	(59)		$	(263)